Beauty Buy (BEAUTY TB) Market Cap: USD204m Price: THB22 · Veena Naidu License No. 24418, 66 2862...

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Initiating Coverage, 24 June 2014

Beauty Community PLC (BEAUTY TB) Buy Consumer Non-cyclical - Household & Personal Products Target Price: THB27.50

Market Cap: USD204m Price: THB22.10

Fast-Growing Cosmetics Retailer

Macro

2.00

Risks

2.00

Growth

3.00

Value

2.00

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Beauty Community (BEAUTY TB)Price Close Relative to Stock Exchange of Thailand Index (RHS)

1122334455

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Source: Bloomberg

Avg Turnover (THB/USD) 14.5m/0.45m

Cons. Upside (%) 12.7

Upside (%) 24.4

52-wk Price low/high (THB) 17.1 - 26.0

Free float (%) 20

Share outstanding (m) 300

Shareholders (%)

Suwin Kraibhubes group 64.1

Pracha Damrongsuthipong 3.7

Thai NVDR 2.8

Share Performance (%)

YTD 1m 3m 6m 12m

Absolute 9.4 7.3 10.5 7.3 (11.6)

Relative (3.7) 2.2 2.5 (3.4) (16.5)

Shariah compliant

Veena Naidu License No. 24418, 66 2862 9752

[email protected]

Supanee Oonhapattana +662 862-9999 ext 9755

[email protected]

Forecasts and Valuations Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F

Total turnover (THBm) 612 770 976 1,253 1,597

Reported net profit (THBm) 134 173 212 259 331

Recurring net profit (THBm) 134 173 212 259 331

Recurring net profit growth (%) 0.0 29.2 22.0 22.5 27.5

Recurring EPS (THB) 2.44 0.58 0.71 0.86 1.10

Recurring P/E (x) 9.1 38.2 31.3 25.6 20.1

P/B (x) 5.33 6.72 6.61 6.18 5.67

P/CF (x) 8.3 57.4 32.1 18.5 17.1

EV/EBITDA (x) 5.3 25.3 22.1 15.9 12.0

Return on average equity (%) 0.0 28.5 21.3 25.0 29.5

Net debt to equity (%) net cash net cash net cash net cash net cash

Our vs consensus EPS (adjusted) (%) (4.0) (4.2)

Source: Company data, RHB estimates

We initiate coverage with a BUY on Beauty Community, pegging our THB27.50 TP to a FY15F P/E of 25x (-1.5SD). The fast-growing cosmetics retailer’s 2013 GPM and NPM were 71% and 22% respectively and revenue has been growing every quarter for the past two years due to its expansion efforts. It plans to open 66 shops this year, bringing the total in Thailand and neighbouring countries to 298.

Robust expansion in Bangkok and major cities in eight years.

Beauty Community PLC (Beauty) plans to open 66 shops in 2014, bringing the total number of branches to 298. The company is expected to continue expanding at a pace of around 60 branches annually.

Growing revenue and net profit. Beauty’s revenue has been rising y-o-

y and q-o-q. Its 2013 revenue grew 27% y-o-y vs +26% in 2012. Meanwhile, its 2013 net profit climbed 22% y-o-y, a slight drop from +29% y-o-y in 2012, due to higher selling, general and administrative (SG&A) costs from opening 53 branches during the year. Same-store sales growth (SSSG) was at 5.55% in 2013 vs 4.74% in 2012, and is expected to increase to 6% in 2014. With the political situation improving and the expected recovery in GDP growth next year, consumption is likely to increase, which may stimulate the company’s earnings growth.

High 71% GPM, 22% NPM in 2013. Beauty recorded a very high GPM

of 71% and NPM of 22% in 2013. However, its GPM started to fall from 3Q13 due to the launch of Beauty Market, a 100 sq m shopping mall outlet that sells various international cosmetic brands. Still, the company maintained a high GPM of 68% and NPM of 20% in 1Q14.

Growing brands, sales channels and product variety. In 2013, it

opened Beauty Market, a cosmetics outlet selling over 300 brands of products. It also sells Girly Girly – a low-priced Japanese skincare and makeup brand – in convenience stores. Customers can also buy products via catalogue orders, e-commerce channels and at events.

Expansion into Asean to benefit from zero tariffs. Beauty has

branches in Cambodia, Vietnam and Myanmar and is set to expand into Laos this year. Its plan is to open 13 new shops in Asean this year. As the Asean countries have agreed not to impose tariffs on most cosmetics products since 2010, this should provide Beauty with opportunities to export products into neighbouring countries.

Beauty (BEAUTY TB) 24 June 2014

See important disclosures at the end of this report 2

Table Of Contents

Valuation 3

Key Risks 4

Company Overview 4

Financial Highlights 13



Valuation

In June 2014, Franklin Templeton Investments purchased 10% of Beauty’s shares from the founder, CEO and largest shareholder Dr Suwin Kraibhubes. On 5 June 2014, Franklin Templeton Investments became the company’s second-biggest shareholder.

We estimate Beauty’s TP at THB27.50, pegged to a FY15F P/E of 25x, which is around -1.5SD from its mean P/E. This premium multiple is based on:

i. Accelerating revenue growth of more than 20% every year since 2010

ii. Its high GPM of 71% and NPM of 22% for 2013

iii. An increase in its number of shops in Thailand and Asean

iv. Rising income levels among the population

v. High ROEs of 26-29% expected for 2014-2015

Figure 1: Beauty’s trailing P/E

Source: Bloomberg, RHB estimates

Figure 2: A peer comparison

Company

-------P/E------ -----P/BV---- --EV/EBITDA-- --Div yield (%)-- -----ROE (%)--- Market Cap (THBm)

2014F 2015F 2014F 2015F 2014F 2015F 2014F 2015F 2014F 2015F 2014F 2015F

Elizabeth Arden

RDEN US 142.93 29.61 1.49 1.43 13.51 9.43 N/A N/A 0.90 3.65 738.82 738.82

Fancl Corp 4921 JP 64.74 36.42 1.04 1.03 7.19 6.47 2.83 2.83 1.60 2.88 78,407.45 78,407.45

L'Occitane International

973 HK 25.22 19.65 3.19 2.89 13.02 10.58 1.48 1.83 13.64 15.26 26,378.59 26,378.59

Beauty Community

BEAUTY TB 23.31 19.14 6.10 5.83 15.11 11.93 3.68 4.54 26.09 29.62 6,510.00 6,510.00

PZ Cussons PZC LN 19.51 18.38 2.52 2.40 12.63 11.94 2.29 2.49 15.30 15.00 1,497.11 1,497.11

Karmart Kamart TB 17.54 14.44 4.65 4.14 11.75 9.80 4.95 5.66 29.94 28.94 3,495.71 3,528.69

Oriflame Cosmetics

ORI SS 15.90 13.63 5.46 4.89 9.36 8.57 5.14 5.55 36.32 38.83 8,996.43 8,996.43

Average 44.16 21.61 3.50 3.23 11.80 9.82 3.39 3.82 17.68 19.17 18,003.45 18,008.16

Source: Bloomberg, RHB estimates



Key Risks Competition from Korean and Japanese brands. Beauty faces competition

primarily from Korean and Japanese brands. However, we believe it may be able to compete with its rivals in terms of product quality, since some of its products are made in Korea or by a Japanese company based in Thailand.

Slow economic growth may affect purchasing power. Although cosmetics are

deemed necessary items by many young women and working women, rising costs of living and a slower rate of salary increases may mean that Beauty’s sales may not grow much in the short term.

Company Overview Beauty’s CEO and founder, Dr Suwin Kraibhubes, has 16 years of experience in the cosmetics retailing business. The Suwin Kraibhubes group holds 54.1% of the company, of which Dr Suwin Kraibhubes alone owns a 32% stake.

The second-biggest shareholder, Franklin Templeton Investments, holds a 10% stake in the company since 6 June.

Figure 3: Shareholding structure

Source: Company data

Dr Suwin Kraibhubes founded Beauty Community in 1998 amid Thailand’s financial crisis. The company started out as a 6 sq m shop named Mona, which sold imported cosmetics in Siam Square, a shopping centre catering to young people in Bangkok. In 2006, the shop was rebranded as Beauty Buffet, which sold cosmetics with appealing packaging targeting the middle-income market. The business was so successful that the company’s registered capital grew to THB300m in July 2012 from THB1m in 2006. Beauty made its debut on the stock exchange of Thailand (SET) on 12 Dec 2012.



Core business and future projects

Trendy cosmetic brands. Beauty has five brands – Beauty Buffet, Beauty Cottage,

Beauty Market, Made in Nature and Girly Girl. Last year, it added 66 new items of makeup and skincare across its brands.

Figure 4: Beauty’s cosmetic brands Business

Channel Cosmetics retail

Cosmetics retail

Cosmetics retail

Supermarket, hypermarket & e-commerce

Convenience store, e-commerce & catalogue

Size 35 sq m 35 sq m 100 sq m n/a n/a

Brand Multi brands (Private label)

Single brand (Private label)

Multi brands (International sourcing & private labels)



Position Fun and exciting variety of products at reasonable prices

Premium natural beauty products at high prices

Beauty convenience store with more than 300 brands

High-quality natural skincare with Korea concepts

Japanese-style skincare & makeup at low prices

Target Teenagers to working women

College students to working women

All ages All ages Teenagers to working women

Revenue contribution

79% 15% 1% (launched in 2013)

3% (launched in 2Q12)

0% (launched in 2013)


Figure 5: Beauty Buffet products


Figure 6: Beauty Cottage products Figure 7: Made in Nature products

Source: Company data Source: Company data

Figure 8: Beauty’s product lines


Beauty Market



Newly-launched Beauty Market shops measure 100 sq m on average each. In 2013, the company set up three Beauty Market shops in shopping malls, namely the Seacon Square, Future Park Rangsit and Central Plaza Chiang Mai (in the airport).

Figure 9: Beauty Market store


Beauty Cottage

Figure 10: Newly opened at Siam Square

Source: RHB

Products

Beauty’s revenue is mostly derived from makeup (2013: 47%) and skincare (46%). Revenue contribution from its makeup unit is declining while that of skincare is increasing. In 2013, the company expanded its product lines to include food supplements, which contributed 3% of total revenue in the first year.

Figure 11: Beauty’s main products are makeup (47%) and skincare (46%)




A peer comparison

Ranked No. 4 by revenue among its peers. While the company started operations

only 13 years ago and rebranded its former stores to Beauty Buffet just eight years ago, its revenue was the fourth-highest among its peers in 2011-2012 (see Figure 12, latest available data) despite its shortest number of operating years, according to data from the company and the Ministry of Commerce.

Robust 71% GPM and 22% NPM in 2013. Beauty has one of the highest GPMs and NPMs among its peers, beating both Cute Press and Oriental Princess.

Figure 12: Beauty’s revenue vs its peers Figure 13: Beauty’s margins vs its peers (2012)

Source: Company data, Ministry of Commerce Source: Ministry of Commerce, RHB estimates

Figure 14: Beauty’s growth vs peers (2012) Figure 15: It has the lowest D/E ratio among its peers (2012)

Source: Company data, Ministry of Commerce Source: Company data, Ministry of Commerce

Higher NPM than Karmart’s. Beauty consistently booked a NPM of c.21%, higher

than retailer Karmart PCL (KAMART TB, NR)’s NPM of 18% in 2013.

Figure 16: Beauty and Karmart’s revenue comparison Figure 17: Beauty’s NPM is higher than Karmart’s

Source: Settrade Source: Ministry of Commerce, RHB estimates



Figure 18: Comparison of valuations and metrics P/E P/BV EV/EBITDA Div yield (%) ROE (%)

2014F

2015F

2014F

2015F

2014F

2015F

2014F

2015F

2014F

2015F

Beauty 22.11 18.24 5.65 5.40 13.86 10.95 3.97 4.90 25.98 29.64

Karmart 16.39 13.62 4.35 3.91 10.90 9.25 5.14 6.00 29.53 28.94

Source: Bloomberg

Strategy

Targeting the middle-income market. Beauty is targeting the large middle-income

customer base by promoting high-quality products with premium designs at reasonable prices.

Figure 19: Target market


Figure 20: Comparison of product prices (in THB) by brand

Compact Powder

Blush Lipstick Facial Mask

Facial Care Body

Lotion

Shiseido 1414-1903 1296-1532 1041-1159

2700-4931 1532-11,197 NA

L'Occitane 1450 NA NA NA 1860-4950 1050-2450

Yves Rocher NA 450 490-590 490-520 360-450 340

Bodyshop 850-1220 620-1190 260-590 650-1220 590-1620 550 Oriental Princess 305-495 155-535 195-315 85-565 125-915 125-235

Karmart 295-1050 195-1190 59-650 15-650 99-550 99-650

Etude 238-619 158-539 158-475 63-349 190-475 NA Beauty Cottage 395-575 395-425 165-345 75-545 245-1145 115-590 Beauty Buffet 220-570 190-379 119-375 85-220 119-890 150-295

Maybeline 149-349 179-399 179-399 NA NA NA

Cute Press 99-299 139-189 69-189 89-109 149-599 109-229

Source: RHB estimates

High-quality product Premium design Large target group Affordable prices



Advantages

Figure 21: Beauty’s advantages over competitors Local Brand Beauty Community Imported Brand

Brand Single brand Multi-brand with more product and brand variety

Mostly single brand

Price Mid-high Mid-high Very high

Product Suits local skin Suits local skin May not suit local skin

Production Own factory OEM, more production flexibility and specialisation. Comparable quality to imported brand

Own factory & OEM

Location Provincial small towns

Easy to access location in city. Targets mid-end market.

Channels Limited, only available at retail shops

Diverse, various channels Limited, only available at retail shops


Marketing strategy

Online marketing via Instagram, blogs and social media.

Customer relationship management (CRM) – eg members are able to collect points and entitled to special sales. In 2H13, its CRM campaign generated THB21m in revenue.

Retail business drives revenue. Around 95% of Beauty’s revenue comes from its

retail outlets.

Figure 22: 95% of revenue comes from retail outlets Channel Percent of revenue

(%) Average

Revenue/shop (THBm)

Breakeven (months)

2012 2013 2012 2013

Beauty Buffet 84.7% 78.9% 4.40 4.30 8-12

Beauty Cottage 95% 11.0% 14.4% 2.74 2.80 8-12

Beauty Market 0.0% 1.4% n/a 4.43 7-8

Franchise 2.7% 2.5%

Wholesale and other 1.0% 1.5%

Modern Trade 0.2% 1.4%

Total revenue 100% 100%


Set to open 66 shops in 2014. After opening 53 shops in 2013, Beauty plans to

open 66 shops in 2014. As it has already opened 55 new shops in 1Q14, we believe the company should be able to achieve its target this year.

Figure 23: Number of shops estimated to reach 298 in 2014




Strategic locations. Beauty’s retail outlets are strategically located in Bangkok

(about 60%) and major cities all over the country. In Bangkok, its shops are located in mid-range shopping malls and in Bangkok Train System (BTS) stations, attracting a large number of commuters.

Overseas expansion. Beauty has been setting up shops in neighbouring countries

since 2012. It targets to open 13 new overseas outlets in 2014.

Figure 24: Targeted number of new overseas shops in 2014


Figure 25: Beauty’s stores in Vietnam and Myanmar


Monthly sales performance evaluation. Beauty reviews the sales performance of

its outlets monthly and drops products with low sales should the need arise. This practice helps the company adjust its supply to better meet market demand.

Location

Beauty deems its strategic outlet locations a contributing factor for its success. It has set up shops mostly in shopping malls, eg Central Plaza, Robinson Department Store, The Mall and Major Cineplex as well as large supermarkets like Tesco Lotus and Big C.

Location criteria:

i. Province, income per capita, proximity to a community or university

ii. In shopping malls, its shops are located in high-traffic areas, eg near food courts, cinemas, supermarkets or escalators.

iii. Reasonable rental rates compared to shops opened in similar locations

iv. High-traffic areas where it can promote brand awareness and improve its position



Figure 26: Number of shops by location

Location

No. of shops (Beauty Buffet)

No. of shops (Beauty Cottage)

No. of shops (Beauty Market)

2013 2012 2013 2012 2012 2013

Tesco Lotus 52 42 1 1 - -

Big C 31 27 3 1 - -

Central Plaza 17 16 12 4 - 1

The Mall 6 6 4 2 - -

Robinson 4 4 1 - - -

Major Cineplex 4 4 - - - -

BTS skytrain 4 4 - - - -

Other 24 17 10 2 - 2

Total 142 120 31 10 - 3

Franchise 6 6 - - - -

Foreign country 1 - - - - -

Grand Total 149 126 31 10 - 3


Franchises

Beauty has only six Beauty Buffet franchises. The franchisees signed 5-year franchise contracts with the company in 2011 and 2012. Beauty does not have a policy of granting more franchises, since it aims to generate revenue via its own shops.

Figure 27: Franchises

Shopping Mall Province Contract started Contract

ends

Big C Bangkok,Bangna April 2011 April 2016

Big C Prae April 2011 April 2016

Big C Sakolnakorn April 2011 April 2016

Central Plaza Udonthani July 2011 July 2016

Central Udonthani Khon Kaen April 2011 April 2016

Tesco Lotus Utaradit July 2012 July 2017


Wholesale

Beauty started selling Made in Nature products in big supermarkets like Central Plaza and The Mall in 2012. They are positioned as high-quality products for the

mass market and are sold at competitive prices. Their active ingredients are imported from Korea. In 2013, the company started selling products from Beauty Buffet, Beauty Cottage and Girly Girly via 7-Catalog and websites Zalora and Ensogo.



Costs

As Beauty’s products are made by original equipment manufacturers (OEMs), it is able to engage various manufacturers to produce different products – thereby enabling it to benefit from each manufacturer’s specialisation.

In terms of SG&A expenses, most of the costs come from rent (a fixed cost) and operating expenses. Its SG&A-to-sales ratios were around 43% in 2012 and 46% in 2013. The cost hike was mainly due to the rapid growth of its branch network.

Figure 28: SG&A costs




Financial Highlights Rapid revenue growth. Beauty’s revenue growth had been on an uptrend from

2010-2013. During 1Q12-1Q14, revenue grew at a rate of around 25% annually or 6% quarterly, indicating that the company’s brand positioning has been improving consistently. Meanwhile, both its gross profit and net profit rose by more than 20% y-o-y in 2013.

Figure 29: Revenue growth on an uptrend


Robust 68% GPM and 20% NPM in 1Q14. Beauty has positioned itself as a retailer

of high-quality products with natural ingredients and trendy packaging, which fetch high margins. Although its SG&A costs are quite high from operating almost 300 shops in Bangkok and major cities, its NPM has remained steady at around 20%.

Figure 30: Revenue has been growing quarterly Figure 31: High 1Q14 GPM (68%) and NPM (20%)

Source: Company data Source: Company data

SSSG is rising. Beauty’s SSSG reached 4.74% in 2012 and 5.55% in 2013, and is

estimated at 6% in 2014. The improved political situation and the expected recovery in GDP growth (our economist currently projects 4.0% growth in 2015, from 1.2% in 2014) should support consumption, which may boost the company’s earnings.

Figure 32: SSSG and revenue growth (2012-2014)

Growth 2012 2013 2014F

Same-store sales growth (%) 4.7% 5.6% 6.0%

Revenue growth (%) 25.8% 26.8% 28.3% Source: Company data, RHB estimates

Healthy 1Q14 NPM of 20% despite weak economy. Despite Thailand’s slow

economic growth, Beauty recorded a healthy NPM of 20% in 1Q14, partly because cosmetics are increasingly viewed as a necessity by many young women and working women in the country nowadays.

Bulk of revenue earned in 4Q. Beauty’s revenue increases every quarter and the

bulk of its revenue is generated in the fourth quarter, which coincides with the festive season. Specifically, 28% of its 2012 revenue was generated in 4Q, while for 2013, it was 27% (see Figure 33). Although 1Q14 SSSG declined to 1.89% from 5.55% in 2013, 1Q14 revenue was still higher than revenue in the previous quarter.



Figure 33: Proportion of quarterly revenue over whole-year revenue (%)


Figure 34: 1Q14 results highlights

THBm 1QFY13 4QFY13 1QFY14 q-o-q (%) y-o-y (%)

Revenue 226.5 267.4 274.3 2.6% 21.1%

COGS (62.7) (83.8) (87.7) 4.6% 39.8%

Gross profit 163.8 183.7 186.6 1.6% 13.9%

GPM (%) 72% 69% 68%

SG&A (102.2) (123.4) (126.3) 2.3% 23.6%

Other income 1.0 2.0 1.7 -14.9% 71.1%

EBITDA 69.7 69.5 72.0 3.6% 3.2%

EBITDA Margin (%) 31% 26% 26%

Depreciation (7.1) (7.2) (9.9) 37.3% 39.5%

EBIT 62.6 62.3 62.1 -0.3% -0.9%

EBIT Margin (%) 28% 23% 23%

Interest Income 5.32 5.12 4.86 -5.1% -8.6%

Interest expense (0.1) 0.2 0.0 -100.0% -100.0%

Pretax profit 67.9 67.6 67.0 -0.9% -1.3%

Pretax Margin (%) 30% 25% 24%

Tax (13.7) (13.6) (13.4) -1.8% -2.2%

Effective tax rate (%) 20% 20% 20%

Net Profit 54.20 53.99 53.59 -0.7% -1.1%

Net Margin (%) 24% 20% 20%


Assumptions

Beauty has an annual revenue growth target of 30%. However, to be conservative, we estimate that its revenue may grow only 28% y-o-y annually. Figure 35 shows our other assumptions.

Figure 35: Assumptions

Assumptions 2011 2012 2013 2014F 2015F

New shops

Beauty Buffet 23 28 31 31 30

Beauty Cottage 10 21 19 20 20

Beauty Market 0 0 3 15 15

GPM 71.4% 71.3% 70.5% 68.0% 68.0%

NPM 21.9% 22.5% 21.7% 19.2% 19.2%

SG&A/sale -39.4% -43.8% -46.1% -43.9% -43.9%

Revenue growth N/A 25.8% 26.8% 28.3% 27.5%

Gross profit growth N/A 25.6% 25.4% 23.7% 27.5%

Net profit growth N/A 29.2% 22.0% 13.8% 27.5%




Market

Increasing popularity. As people are paying more attention to their appearance, the

use of cosmetics and skincare products is increasing for both men and women. Beauty targets consumers from teenagers to elderly people. According to data provided by the company, the value of the domestic cosmetics market expanded by around 9% per year from 2007 to 2011, and management believes that it is still growing steadily. However, we note that manufacturers and distributors need to keep up with changes in trends and preferences.

Zero tariffs in Asean. Since 2010, tariffs for most cosmetic products marketed in

Asean have been reduced to zero. This has stimulated exports and imports within the region and opened up more markets for Thailand. However, there may be greater competition from high-end brands from Europe, the US and Japan, as well as low-end brands from China and Indonesia where labour costs are lower. This prompted Thai manufacturers and distributers to establish strong brands with high-quality products and designs at reasonable prices.

To access markets in Asean, Beauty has business partners that are familiar with the rules, regulations and business conditions specific to each country. This has allowed it to expand quickly into these markets with relatively low risk.

Rising household income and spending. According to data from the National

Statistical Office (NSO), average monthly household income and expenditure rose from 2000-2012, pointing to an increase in consumer purchasing power.

Figure 36: Rising monthly income and expenditure

Source: National Statistical Office (NSO)

Higher-income population on the rise. The income levels among the Thai

population are increasing. In 2012, 31% of Thais had individual monthly income of THB5,001-10,000, vs 24% in July 2007. The second-largest group, which earns between THB3,001 and THB5,000 each month, rose to 25% from 22% over the same period. Such trends indicate that there are opportunities for Beauty to expand its customer base and win new clients, given the higher purchasing power.

Growing beauty and personal care products market in the Asia-Pacific. The

value of the beauty and personal care products market in the Asia-Pacific has been growing each year at an average of 3.7%, indicating that there is potential for Beauty to capture more market share.

Figure 37: Higher-income Thai population on the rise

Figure 38: Beauty and personal care products market in Asia-Pacific is growing

Source: National Statistical Office (NSO) Source: Bloomberg



Financial Exhibits

Profit & Loss (THBm) Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F

Total turnover 612 770 976 1,253 1,597

Cost of sales (175) (221) (288) (401) (511)

Gross profit 437 549 688 852 1,086

Selling expenses (241) (338) (450) (527) (672)

Operating profit 195 211 238 324 414

Operating EBITDA 213 232 269 383 504

Depreciation of fixed assets (17) (21) (30) (59) (90)

Operating EBIT 195 211 238 324 414

Other recurring income 2 4 5 - -

Interest income 1 4 22 - -

Interest expense (1) - - - -

Pre-tax profit 198 219 265 324 414

Taxation (63) (46) (53) (65) (83)

Profit after tax & minorities 134 173 212 259 331

Reported net profit 134 173 212 259 331

Recurring net profit 134 173 212 259 331


Cash flow (THBm) Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F

Operating profit 195 211 238 324 414

Depreciation & amortisation 17 21 30 59 90

Change in working capital (66) (117) (62) (25) (117)

Operating cash flow 146 116 207 358 387

Cash flow from operations 146 116 207 358 387

Capex (22) (45) (62) (334) (94)

Other investing cash flow 2 (460) (49) 8 (1)

Cash flow from investing activities (20) (505) (111) (326) (95)

Other financing cash flow (37) 583 (202) (190) (233)

Cash flow from financing activities (37) 583 (202) (190) (233)

Cash at beginning of period 16 105 298 192 34

Total cash generated 89 193 (106) (158) 59

Implied cash at end of period 105 299 192 34 93




Financial Exhibits

Balance Sheet (THBm) Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F

Total cash and equivalents 105 758 692 534 593

Inventories 93 124 176 180 230

Accounts receivable 7 12 26 25 32

Other current assets - 0 0 - -

Total current assets 205 894 894 739 855

Tangible fixed assets 95 122 157 432 436

Intangible assets 1 2 11 3 3

Total other assets 53 61 77 74 91

Total non-current assets 149 185 244 509 531

Total assets 354 1,079 1,138 1,248 1,386

Accounts payable 64 69 105 146 187

Other current liabilities 51 14 25 25 25

Total current liabilities 115 83 131 172 212

Total long-term debt 8 5 - - -

Other liabilities 3 4 4 4 4

Total non-current liabilities 11 9 4 4 4

Total liabilities 126 92 135 176 216

Share capital 55 300 300 300 300

Retained earnings reserve 173 130 147 216 313

Other reserves - 556 556 556 556

Shareholders' equity 228 987 1,003 1,072 1,169

Total equity 228 987 1,003 1,072 1,169

Total liabilities & equity 354 1,079 1,138 1,248 1,386


Key Ratios (THB) Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F

Revenue growth (%) 0.0 25.8 26.8 28.3 27.5

Operating profit growth (%) 0.0 8.1 12.9 36.1 27.5

Net profit growth (%) 0.0 29.2 22.0 22.5 27.5

EPS growth (%) 0.0 (76.3) 22.0 22.5 27.5

Bv per share growth (%) 0.0 (20.7) 1.7 6.9 9.1

Operating margin (%) 31.9 27.4 24.4 25.9 25.9

Net profit margin (%) 21.9 22.5 21.7 20.7 20.7

Return on average assets (%) 0.0 24.2 19.1 21.7 25.1

Return on average equity (%) 0.0 28.5 21.3 25.0 29.5

Net debt to equity (%) (42.7) (76.3) (69.0) (49.8) (50.7)

Recurrent cash flow per share 2.66 0.39 0.69 1.19 1.29




SWOT Analysis

A fast-growing business

Has recognised brands

Strong competition in the market

Increasing opportunities in the Asean market after the Asean Economic Community (AEC) goes into force in 2015

Weak domestic economy may affect consumers’ purchasing power

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Jan

-12

Jan

-13

Jan

-14

Jan

-15

P/E (x) vs EPS growth

P/E (x) (lhs) EPS growth (rhs)

0%

4%

9%

13%

18%

22%

26%

31%

35%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

P/BV (x) vs ROAE

P/B (x) (lhs) Return on average equity (rhs)

Source: Company data, RHB estimates Source: Company data, RHB estimates

Company Profile Beauty Community PCL is a retailer of cosmetic products targeting mid-end. Currently there are around 300 shops in Bangkok, major provinces in Thailand and neighboring countries e.g. Cambodia, Vietnam, Myanmar and Laos.



Recommendation Chart

14

16

18

20

22

24

26

28

30

Dec-12 May-13 Oct-13 Feb-14

Price Close

Source: RHB estimates, Bloomberg

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RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for information purposes only. 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RHB, its affiliates and related companies, their respective directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto, and may from time to time add to, or dispose off, or may be materially interested in any such securities. Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in this research report. RHB and its employees and/or agents do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arise from any reliance based on this report or further communication given in relation to this report, including where such losses, loss of profits or damages are alleged to have arisen due to the contents of such report or communication being perceived as defamatory in nature. The term “RHB” shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction ment ioned specifically herein below and shall refer to RHB Research Institute Sdn Bhd, its holding company, affiliates, subsidiaries and related companies. All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or published for any purpose without prior consent of RHB and RHB accepts no liability whatsoever for the actions of third parties in this respect. Malaysia This report is published and distributed in Malaysia by RHB Research Institute Sdn Bhd (233327-M), Level 11, Tower One, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur, a wholly-owned subsidiary of RHB Investment Bank Berhad (RHBIB), which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Singapore This report is published and distributed in Singapore by DMG & Partners Research Pte Ltd (Reg. No. 200808705N), a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group) and OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB”, which in turn is a wholly-owned subsidiary of RHB Capital Berhad). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd may have received compensation from the company covered in this report for its corporate finance or its dealing activities; this report is therefore classified as a non-independent report. As of 23 June 2014, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd do not have proprietary positions in the securities covered in this report, except for: a) - As of 23 June 2014, none of the analysts who covered the securities in this report has an interest in such securities, except for: a) Beauty Community PCL Special Distribution by RHB Where the research report is produced by an RHB entity (excluding DMG & Partners Research Pte Ltd) and distributed in Singapore, it is only distributed to "Institutional Investors", "Expert Investors" or "Accredited Investors" as defined in the Securities and Futures Act, CAP. 289 of Singapore. 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21

RHBSHK, RHBIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company. RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company. Risk Disclosure Statements The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. RHBSHK does not maintain a predetermined schedule for publication of research and will not necessarily update this report Indonesia This report is published and distributed in Indonesia by PT RHB OSK Securities Indonesia (formerly known as PT OSK Nusadana Securities Indonesia), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Thailand This report is published and distributed in Thailand by RHB OSK Securities (Thailand) PCL (formerly known as OSK Securities (Thailand) PCL), a subsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-owned subsidiary of RHB Capital Berhad. Other Jurisdictions In any other jurisdictions, this report is intended to be distributed to qualified, accredited and professional investors, in compliance with the law and regulations of the jurisdictions. DMG & Partners Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage DISCLAIMERS This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report. The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change without notice. This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. DMG & Partners Research Pte Ltd is a wholly-owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as “RHBIB” which in turn is a wholly-owned subsidiary of RHB Capital Berhad) and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effect transactions in the securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporations whose securities are covered in the report. This report is therefore classified as a non-independent report. As of 23 June 2014, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the subject companies, except for: a) - As of 23 June 2014, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) Beauty Community PCL DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N)

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Bangkok

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Thai Institute of Directors Association (IOD) – Corporate Governance Report Rating 2013

ADVANC BCP CPF ERW IVL NKI PS ROBINS SCB SNC TCAP TMB UV AOT BECL CPN GRAMMY KBANK NOBLE PSL RS SCC SPALI THAI TNITY VGI ASIMAR BKI CSL HANA KKP PAP PTT S&J SCSMG SPI THCOM TOP WACOAL BAFS BROOK DRT HEMRAJ KTB PG PTTEP SAMART SE-ED SSI THRE TRC BANPU BTS DTAC ICC LPN PHOL PTTGC SAMTEL SIM SSSC TIP TRUE BAY CIMB EASTW INTUCH MCOT PR QH SAT SIS SVI TASCO TTW BBL CK EGCO IRPC MINT PRANDA RATCH SC SITHAI SYMC TKT TVO

2S AYUD CNT GL KKC MBK OISHI SABINA STANLY TK TTCL zZMICO ACAP BEC CPALL GLOW KSL MBKET PB SAMCO STEC TLUXE TUF AF BFIT CSC GOLD KWC MFC PDI SCCC SUC TMILL TWFP AHC BH DCC GSTEL L&E MFEC PE SCG SUSCO TMT TYM AIT BIGC DELTA GUNKUL LANNA MODERN PF SEAFCO SYNTEC TNL UAC AKP BJC DTC HMPRO LH MTI PJW SFP TASCO TOG UMI AMANAH BLA ECL HTC LHBANK NBC PM SIAM TCP TPC UMS AMARIN BMCL EE IFEC LHK NCH PPM SINGER TF TPCORP UP AMATA BWG EIC INET LIVE NINE PPP SIRI TFD TPIPL UPOIC AP CCET ESSO ITD LOXLEY NMG PREB SKR TFI TRT UT APCO CENTEL FE JAS LRH NSI PRG SMT THANA TRU VIBHA APCS CFRESH FORTH JUBILE LST NWR PT SNP THANI TSC VIH ASIA CGS GBX KBS MACO OCC PYLON SPCG THIP TSTE VNG ASK CHOW GC KCE MAJOR OFM QTC SPPT TICON TSTH VNT ASP CM GFPT KGI MAKRO OGC RASA SSF TIPCO TTA YUASA *** PHATRA was voluntarily delisted from the Stock Exchange of Thailand effectively on September 25,2012

A BCH CRANE FPI IT MBAX PICO SGP TBSP TPP WIN AAV BEAUTY CSP FSS JMART MDX PL SIMAT TCCC TR WORK AEC BGI CSR GENCO JMT PRINC POST SLC TEAM TTI AEONTS BLAND CTW GFM JTS MJD PRECHA SMIT TGCI TVD AFC BOL DEMCO GJS JUTHA MK PRIN SMK TIC TVI AGE BROCK DNA GLOBAL KASET MOONG Q-CON SOLAR TIES TWZ AH BSBM DRACO HFT KC MPIC QLT SPC TIW UBIS AI CHARAN EA HTECH KCAR MSC RCI SPG TKS UEC AJ CHUO EARTH HYDRO KDH NC RCL SRICHA TMC UOBKH AKR CI EASON IFS KTC NIPPON ROJNA SSC TMD UPF ALUCON CIG EMC IHL KWH NNCL RPC STA TMI UWC ANAN CITY EPCO ILINK LALIN NTV SCBLIF SUPER TNDT VARO ARIP CMR F&D INOX LEE OSK SCP SVOA TNPC VTE AS CNS FNS IRC MATCH PAE SENA SWC TOPP WAVE BAT-3K CPL FOCUS IRPC MATI PATO SF SYNEX TPA WG *** CIMBI was voluntarily delisted from the Stock Exchange of Thailand effectively on September 25, 2012.

IOD (IOD Disclaimer)

การเปิดเผลผลการส ารวจของสมาคมส่งเสริมสถาบันกรรมการบรษิัทไทย (IOD) ในเรื่องการก ากับดูแลกิจการ (Corporate Governance) นี้เป็นการด าเนินการตามนโยบายของส านักงานคณะกรรมการก ากับหลักทรัพย์และตลาดหลักทรัพย์ โดยการส ารวจของ IOD เป็นการส ารวจและประเมินจากข้อมูลของบรษัทจดทะเบียนในตลาดหลักทรัพย์แห่งประเทศไทยและตลาดหลกัทรัพย์เอ็มเอไอ ที่มีการเปิดเผยต่อสาธารณะและเป็นข้อมูลที่ผูล้งทุนทั่วไปสามารถเข้าถงึได้ ดังนั้นผลส ารวจดังกล่าวจึงเป็นการน าเสนอในมุมมองของบุคคลภายนอกโดยไม่ได้เป็นการประเมินการปฏิบัติและมิได้มีการใช้ข้อมูลภายในในการประเมิน

อนึ่ง ผลการส ารวจดังกล่าว เป็นผลการส ารวจ ณ วนัที่ปรากฎในรายงานการก ากับดแูละกิจการบริษัทจดทะเบียนไทยเท่านั้น ดังนั้นผลการส ารวจจึงอาจเปลี่ยนแปลงได้ภายหลังวันดังกล่าว ทัง้นี้บริษัทหลักทรัพย์ อาร์เอสบี โอเอส เค จ ากัด (มหาชน) มิได้ยืนยันหรือรับรองถึงความถูกต้องของผลการส ารวจดงักล่าวแต่อย่างใด

Beauty Buy (BEAUTY TB) Market Cap: USD204m Price: THB22 · Veena Naidu License No. 24418, 66 2862...

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Transcript of Beauty Buy (BEAUTY TB) Market Cap: USD204m Price: THB22 · Veena Naidu License No. 24418, 66 2862...